5 PSUs to set up manufacturing units to increase coal gasification capacity

Coal ministry proposes PLI for ammonium nitrate to raise volumes and price competitiveness

To help achieve the Centre’s target of having 100 million tonnes (MT) of coal gasification capacity in the country by 2030, five public sector undertakings (PSU) will set up manufacturing units, senior officials said.

National miner Coal India (CIL), manufacturing major BHEL, GAIL, Indian Oil Corporation (IOCL), and Neyveli Lignite Corporation (NLC) will set up five manufacturing units for coal gasification.

This would include joint ventures by BHEL with CIL and GAIL with IOCL and standalone units by these PSUs as well.

The units will produce methanol, ammonia, ammonium nitrate and urea. For ammonium nitrate, of which the fertiliser industry is a major user, the ministry of coal has proposed a production-linked incentive (PLI) scheme. “In order to provide initial support, the ministry has asked the finance ministry to set up a PLI for ammonium nitrate manufacturing. This would bring volumes and ensure the price is competitive to that of the import markets,” said an official.

Senior executives said the PLI scheme is being pegged at 20 per cent of sales. India currently imports close to 20 per cent of its ammonia and ammonium nitrate consumption, primarily from Turkey, Russia, and Bulgaria. In a recent investors’ meeting, the ministry of coal pointed out that recent global events indicate a need for development of indigenous capacity.

Methanol, which is the main product from coal gasification, is majorly import driven in India with 90 per cent of the demand being met from Iran and Saudi Arabia. According to the coal ministry’s estimates, $50 billion is the forex outgo for chemical and petrochemical products in India, as natural gas imports grew at a compound annual growth rate (CAGR) of 5.89 per cent during last decade.

The flagship Aatmanirbhar Bharat programme of the Centre has set a target of 100 MT of capacity under the ‘National Coal Gasification Mission’. The coal ministry has also created a separate window for auction of coal on a long-term basis (15 years) for both the private and public sectors. It has also provided a 50 per cent rebate in revenue share in commercial coal block auctions for certain projects of coal gasification.

The Union Budget for 2022-23 proposed four pilot projects for coal gasification and conversion of coal into chemicals “to evolve technical and financial viability”.

CIL has identified five mines for its surface coal gasification projects with project locations in Chhattisgarh, Maharashtra, Odisha, West Bengal, and Tamil Nadu. Of the five, two would be for making ammonium nitrate with a capacity of 0.66 MTPA each, one for ammonia with 0.7 MTPA, one methanol unit of 0.66 MTPA and one urea unit of 1.27 MTPA.

The technical and project feasibility of the projects are being assessed, said officials.

Coal ministry officials said the model of financing under the PLI scheme is still being worked out — whether it would be a capital grant, operational grant, or hybrid model.

In the works

• BHEL, GAIL, IOCL, and Neyveli Lignite Corporation to set up coal gasification units
• To produce methanol, ammonia, ammonium nitrate, urea
• Fertiliser industry identified as major consumer
• PLI proposed for ammonia and ammonium nitrate
• Centre has targeted 100 MT of coal gasification capacity by 2030